RFID: A hotbed of innovation in retail

April 4, 2018

Share

The retail industry is changing more rapidly today than at any time in its history, and the number and complexity of challenges that leadership teams face has never been greater. According to 110 Retail executives surveyed as a part our 2018 RFID in Retail Study, 28 percent specified that the top pressure faced is delivering a superior customer experience, with other major pressures including improving personalized marketing and improving operating profits in an omnichannel environment. Integrating radio-frequency identification (RFID) capabilities and data effectively can support the delivery of a great omnichannel customer experience and improve metrics that increase operating profit.1

The ability to overcome these pressures is a complex problem and usually comes with significant costs. For example, 85 percent of survey respondents report that their company offers customers an omnichannel experience, and 51 percent offer ship from store capability allowing inventory to be available through multiple channels. A major problem retailers face is that nearly 31 percent of orders result in split shipments (from multiple fulfillment sources) due to inventory inefficiency, highlighting the challenge of meeting customer needs while increasing operational complexities. Although retailers are offering some level of an omnichannel experience to satisfy customers, one-third of all shipments have a significant margin loss due to duplicative shipping costs.

Because of these increased inefficiencies, companies have been evaluating technologies that offer data-driven solutions to bridge the gap between providing a superior customer experience and maintaining acceptable levels of profitability.

Does such a technology exist? RFID technology enables the omnichannel delivery and store experience to meet customer expectations. RFID allows retailers to accurately identify inventory, providing location data for a direct improvement on margin dollars by reducing out-of-stocks, informing efficient ordering and fulfillment, and acting as an enabler to many technology use cases such as smart checkout.

As of 2018, a staggering 92 percent of companies surveyed in North America and 69 percent globally have either implemented or were currently implementing or piloting RFID. This is a significant increase from four years ago when RFID penetration was at 34 percent amongst companies included in the 2014 RFID in Retail Survey. It is clear RFID has continued to mature in the retail landscape, with more retailers recognizing the need to adopt the technology to inform and enable their omnichannel strategies to stay competitive. Additionally, RFID technology is becoming increasingly accessible to mainstream retailers as overall costs have decreased. In 2016, 25 percent of non-adopters reported cost as a barrier to implementation, but this was reduced to only 9 percent in 2018.

The stark contrast between leading and lagging retailers utilizing RFID becomes clear when looking at retailers who have invested in omnichannel capabilities. As consumers have indicated preference for shopping through whichever channel is most convenient for them, retailers have added capabilities such as Buy Online, Pickup in Store (BOPIS) and Ship from Store. The 2018 study shows that 72 percent of retailers who have adopted or piloted RFID technology have a BOPIS capability. Conversely, only 26 percent of the retailers who have not adopted RFID offer BOPIS.

Another fulfillment capability, Ship from Store, provides retailers the opportunity to provide store inventory through multiple channels, allowing retailers to maximize margin and reduce markdowns. Sixty-seven percent of RFID-enabled retailers utilize ship from store whereas only 15 percent of non-RFID adopters have this capability. It is apparent that the differences across adopters and non-adopters shows how implementing RFID technology supports the ability to provide consumers many more options to fulfill order requests in a dynamic fulfillment network and potentially reduce markdowns, improve the customer experience, and increase operating profits.

RFID should be at the heart of every Retailer’s omnichannel strategy.

An enabler of innovation. In addition, Retailers are discovering new ways to leverage RFID as use of the technology becomes more widespread. Fifty-five percent of retailers that have adopted or piloted RFID plan to enable smart technology such as smart checkout or smart fitting rooms to improve the customer experience, while 51 percent of retailers plan to use the technology to inform a blockchain implementation. Those effectively adopting RFID and leveraging its data to support use cases are realizing margin benefit. Sixty-five percent of retailers who use RFID to support omnichannel fulfillment also reported an ROI of at least 5 percent, and 98 percent of adopters reported an ROI of at least 5 percent in at least one use case. As more retailers begin exploring emerging technologies to revolutionize their businesses, RFID will undoubtedly serve as an enabler of innovation in the future of retail. With proven capabilities, and decreasing costs, RFID should be at the heart of every Retailer’s omnichannel strategy.

1 All data, unless otherwise stated, is from the Kurt Salmon, part of Accenture Strategy's, 2018 RFID in Retail Study

Share

Jason Sain

Senior Manager – Kurt Salmon, Part of Accenture Strategy

Jason works with leaders to reimagine growth and supply chain strategies, and has led our RFID retail study for the past five years.